Stocks suffer another torrid session

The Sensex plunged sharply for the second straight day, today’s fall being more profound and painful compared to Friday's. The BSE benchmark traded in the red throughout on continued selling. All the BSE sectoral indices ended in the red.

The benchmark Sensex also suffered a bout of volatility, swinging sharply either ways. The 30-shares BSE Sensex settled 348.20 points (2.39%) in deficit, at 14,190.70, recovering some lost ground after plunging to a low of 14,146.22 on value-buying. The Sensex has thus breached a vital support level of 14,200. It had touched an all-time high at 14,724 on Friday (9 February).

The BSE Sensex began on a highly bearish note, as selling pressure spilled over into this week. The horror show had started on Friday, when the benchmark Sensex tumbled close to 113 points, as a lot of stop losses were triggered due to highly leveraged positions in the derivatives market. Its high for the day was 14,529.28. Traders and speculators exited long positions, and chose to sit on the sidelines before the Union Budget. Weak global markets also played spoilsport.

The S&P CNX Nifty lost 129.10 points (3.08%), to 4,058.30.

As the market tanked, the market-breadth, indicative of the overall health of the market, did not look good, as a host of small-cap and mid-cap stocks succumbed to selling. There were close to seven losers for every gainer on BSE. For 2,312 shares that declined on BSE, only 334 rose. Just 27 shares were unchanged.

The BSE clocked a turnover of Rs 3266 crore.

There was complete pandemonium in the market, and not even a single member from the 30-member Sensex pack was spared the rod.

Aluminium major Hindalco Industries plunged the most after its large all-cash acquisition of US-based Novelis raised concerns about a short-term strain on financials. It was down 14% to Rs 149.05 on high volumes of 72.81 lakh shares. Hindalco Industries and Novelis, on Sunday, signed a definitive agreement for Hindalco to acquire Novelis in an all-cash transaction, which values the US firm at approximately $6 billion, including approximately $2.4 billion of debt.

It may be worthwhile to recall a similar situation, when Tata Steel won the bid to acquire Corus, with analysts worrying about the high price paid by Tata Steel to acquire Corus. Novelis is the largest flat rolled products player in the world with a 19% share of the global market.

The Novelis-Hindalco deal will be financed through a recourse debt of $2.8 billion, Hindalco’s treasury contributing $450 million, and SL Iron Ore Mining, another group company, chipping in with $300 million as debt.

Following the transaction, Hindalco, along with Novelis, will be the world's largest aluminium rolling company, one of the biggest producers of primary aluminium in Asia, and India's leading copper producer.

Novelis posted a net loss of $102 million during the third quarter of 2006. The company has been plagued by high metal prices.

Reliance Communications (RCL) dropped 4.63% to Rs 453.55, on a volume of 21.23 lakh shares, after it lost the bid to acquire the fourth largest cellular services provider, Hutch Essar. Vodafone emerged the top bidder with a $19 billion bid.

RCL recovered from a low of Rs 448.15. Vodafone staved off bids from RCL, the Hinduja brothers and Essar itself, to buy Hutchison's 67% stake for $11.1 billion in cash, and $2 billion more in debt, an enterprise value of $18.8 billion. Vodafone's emergence as a top bidder has dashed Reliance Communications' hope of becoming the largest mobile operator in the country. Reliance Communications added 1.2 million subscribers in January 2007.

Bhel (down 6.25% to Rs 2348), Bharti Airtel (down 4.62% to Rs 718), and Gujarat Ambuja Cements (down 4.54% to Rs 132.50) were the other major losers.

Index heavyweight, Reliance Industries, settled at Rs 1,354, down 2.47% from the previous close of Rs 1,388.25 on a volume of 4.98 lakh shares.

Other heavyweight shares, Infosys (down 0.49% to Rs 2350) and ONGC (down 2.12% to Rs 865) also declined. ONGC is reportedly set to acquire up to 35% stake in a Congo oil block held by Italy's ENI in a swap for a similar stake in an Indian oilfield. The deal is expected to be signed on Wednesday.

Zee Entertainment Enterprises (ZEE) dropped 29% to Rs 257, on a volume of 17.66 lakh shares, after the stock went into a no-delivery period ahead of the de-merger of Dish TV, its direct-to-home TV service. The counter clocked 9.30 lakh shares on the BSE. The company has fixed 20 February 2007 as a record date for determining the shareholders of the company eligible for shares in ASC Enterprises, which will be later renamed Dish TV. ZEE will allot 23 fully paid-up equity shares of Re 1 each in ASC for every 10 equity shares held in ZEE.

Technocraft Industries India settled at 100.90 on BSE on its day of debut, notching up a volume of 98.63 lakh shares. It listed at Rs 125 on BSE, a premium of 19.04% over the IPO price of Rs 105. The scrip also touched an intra-day low of Rs 97.35, and an intra-day high of Rs 130. The company raised around Rs 87.36 crore at the upper end of the price band of Rs 95 - 105 per share in the IPO concluded recently. The IPO was oversubscribed 10.67 times.

All the BSE sectoral indices were in the red. The BSE Metals index was the top loser, down 497.62 points (5.46%), to 8,616.43. Ispat Industries (down 7.64% to Rs 13.90), Sterlite Industries (down 4.42% to Rs 439), SAIL (down 5.43% to Rs 107.20), Hindustan Zinc (down 5.05% to Rs 630) and Jindal Stainless (down 4.06% to Rs 115.75) declined.

Shares from the real estate sector declined sharply extending their recent fall. Mahindra Gesco Developers (down 4.24% to Rs 618), Akruti Nirman (down 19% to Rs 450), Peninsula Land (down 10% to Rs 412.95), Unitech (down 10% to Rs 420.95), Parsvnath Developers (down 10.70% to Rs 302.60) and Sobha Developers (down 9.48% to Rs 826.80). Real estate stocks have been correcting in the past few days, as market players turned cautious due to fear of rising interest rates in India, and the Reserve Bank of India (RBI) tightening bank credit to the real estate sectors.

Gail India lost 1.30% to Rs 288.75, off its day’s high of Rs 301.95, after it informed that a joint venture, Brahmaputra Cracker and Polymer, was formed on 8 January 2007. GAIL India holds 70% equity and Numaligarh Refinery, Oil India & the Government of Assam hold 10% equity each.

Suzlon Energy plunged 12.62% to Rs 1089, on concerns about a short-term strain on its financials due to plans for a big acquisition overseas. It offered $1.33 billion for REpower Systems AG, trumping the offer by Areva of France by 20%. Suzlon Energy is bidding in consortium with Martifer, Portugal, a steel construction company operating across Europe, and the second largest shareholder in REpower holding 25.4% stake.

Suzlon and Martifer will establish a special purpose vehicle to give effect to the bid in which Suzlon will own 75% and Martifer 25%. REpower Systems was founded in 2001, and operates in the wind-energy sector, specialising in high output turbine technology particularly suited to offshore turbines. It is a leader in 5 Mw turbines.

Fairfield Atlas rose 4.42% to Rs 88.40, after OC Oerlikon Corporation AG, Pfaffikon, Switzerland & TH Licensing Inc., USA, decided to acquire all its equity shares at Rs 81 per share. All the shares that are validly tendered as per terms of the offer up to a maximum of 54.64 lakh equity shares of the face value of Rs 10 each, representing in aggregate 20% of the paid up equity share capital of the target company. The open offer will open on 30 March 2007, while it is scheduled to close on 18 April 2007.

Sunil Hitech Engineers declined 7.31% to Rs 88.70, even as it bagged new orders to the tune of Rs 62.88 crore, the execution period for which is about two years. Two projects are for structural steel works for RINL, Visakapatnam, worth Rs 25.32 crore, marking its foray into infrastructure development for steel plants. One of the projects is worth Rs 11.95 crore from Bhel for erection work of a boiler. Sunil Hitech Engineers said its current order-book is a robust Rs 512.53 crore.

GHCL slipped 4.48% to Rs 165.25, in an overall weak market despite the company acquiring the assets of US-based Best Manufacturing Group for $ 35 million. Best Manufacturing's annual sales stand at $160 million. Best is a leading manufacturer of home textiles and related items for the hospitality and healthcare sectors in the US.

Subhash Projects & Marketing dropped 5% to Rs 229.95, even as the company said it had bagged two orders worth Rs 63 crore. Subhash Projects has bagged orders - one is worth Rs 23 crore from Karnataka Power Transmission Corporation and the other is Rs 40 crore worth from Haryana Vidyut Prasaran Nigam. Both projects have to be completed in 12 months.

The scope of work for both projects on partial turnkey basis includes construction of 220 Kv sub-station and 220 Kv transmission lines, supply of all matching materials / equipments (excluding power transformer) and erection of all materials / equipments as well as testing and commissioning of the same. Subhash Project’s order-book position is Rs 2800 crore.

Meanwhile, Indian industrial output growth in December slowed from its fastest pace in more than a decade, but its persistent strength and rising inflation kept the prospects of further monetary tightening burning. Output rose 11.1% in December from a year earlier, data showed on Monday, in line with a median estimate of 10.9% of analysts, but slower than the upwardly revised annual growth of 15.4% in November. Manufacturing rose 11.9% in December from a year earlier, Capital goods production rose an annual 20.2%, while consumer goods output rose 7.4%. The government estimates the economy will grow 9.2% in 2006/07, backed by rising industrial output and services.

Most of the Asian and European markets finished in the red, on selling pressure. Hong Kong's Hang Seng fell 84.25 points (0.41%), at 20,593.41, Taiwan's Taiwan Weighted was down 83.17 points (1.06%), at 7,776.36, Singapore's Straits Times plunged 50.43 points (1.57%), at 3,170.46, while South Korea's Seoul Composite index was down 13.39 points (0.94%), to 1,414.29.

US stocks closed lower on Friday after an extensive sell off in stocks inspite of new upgrades announced by Ford Motor and General Motors. The sell-off was prompted by a rise in crude futures, remarks by Federal Reserve officials leaving open the possibility of more rate hikes and concern by Micron Technology executives about memory chip demand and pricing. The Dow Jones Industrial Average closed lower by 56.8 points at 12,580.83, and Nasdaq lost 28.85 points, to 2,459.82.

FIIs were net sellers to the tune of Rs 560 crore in index-based futures on 9 February, the day when the Sensex lost 113 points in a broad decline after a surge in inflation to a more than two-year high. Concerns of a further rise in interest rates grew after the inflation data was released last week. Data released on 9 February 2007 showed that the wholesale price index rose 6.58% in the 12 months to 27 January 2007, the biggest rise in more than two years fanning concerns of a further rise in interest rates.

Net buying by FIIs stood at $153.7 million on 8 February 2007. Mutual funds net sale was Rs 193 crore (Rs 1.93 billion) on the same day. NSE F&O open interest was down by Rs 815 crore (Rs 8.15 billion) at Rs 60,052 crore (Rs 600.52 billion).

Oil prices climbed briefly above $60 a barrel on Friday for the first time since the first trading day of the year, as an unrelenting winter across the US led to belief that heating fuel demand will not wane anytime soon. Light, sweet crude for March delivery rose $0.18, to settle at $59.89 a barrel by afternoon trading on the New York Mercantile Exchange, after rising as high as $60.80.

Meanwhile, gold jumped above $668 an ounce on Monday to its highest in seven months, before losing some of the gains to weakening oil prices. Spot gold hit an intraday high of $668.20 an ounce, its best since mid-July on short-covering, before slipping to $665.75/666.50 an ounce, slightly lower than $666.50/667.20 late in New York. Firm oil prices raise gold's appeal as a hedge against inflation.